UPDATE 1-Poland's KGHM says launches production at key Chilean mine

WARSAW, July 31 (Reuters) - Europe's No.2 copper producer
KGHM launched production at its Sierra Gorda mine in
Chile, one of the world's largest copper projects, the Polish
group said on Thursday.

The Polish state-controlled miner acquired the then
unfinished project two years ago. It become a symbol of Polish
industry's efforts to expand internationally after years of
struggling with the transition from Communist rule.

But since the acquisition the cost of getting production
underway at Sierra Gorda, exceeding $4 billion, has been over a
third more than KGHM initially expected, while falling global
copper prices have hit its profits.

"Following the ramp-up period, which will be completed in
early 2015, the Sierra Gorda mine will produce approximately 120
thousand tonnes of copper, 50 million pounds of molybdenum and
60 thousand ounces of gold annually in the first years of
operations," KGHM said in a statement.

"The commencement of production at the Chilean mine will
decrease the weighted average cost of copper production in the
KGHM group and will decrease its sensitivity to changes in the
copper price," the miner said.

Sierra Gorda's target annual production is for 220 thousand
tonnes of copper, 25 million pounds of molybdenum and 64
thousand ounces of gold.

KGHM acquired the project in 2012 as part of a C$3 billion
($2.8 billion) purchase of Canada's Quadra FNX, now named KGHM
International. That deal allowed it to book the
world's fourth-largest copper deposits.

The Polish miner controls 55 percent of the Chilean project,
while Japanese partner Sumitomo holds the rest.

Across the group, KGHM wants to scale up copper production
by over 40 percent to 1 million tonnes annually by the end of
the decade as its overseas assets gradually kick in.

To finance its investment plans, pegged at a company-wide
total of 4.3 billion zlotys ($1.4 billion) this year alone, the
miner signed a five-year revolving credit deal worth $2.5
billion with a group of lenders earlier this month.
($1 = 1.0901 Canadian Dollars)
($1 = 3.1042 Polish Zlotys)
(Reporting by Adrian Krajewski. Editing by Jane Merriman)